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Freedom Fund Update – October 2013

By 22 Comments

Well, the time has come to update the Freedom Fund once again as we start another month. The Freedom Fund is my portfolio, and I think it’s aptly named. My portfolio is my way to freedom; freedom from a job I don’t desire to purchase goods I don’t need to impress neighbors I don’t care about. This journey is all about freedom and flexibility. One day the dividend income this portfolio generates will fully replace my day job’s income and my time will be completely my own. What could you possibly want to own more than your time?

I feel extremely fortunate and thankful that I’m able to post these updates every single month which shows the power of monthly contributions to investments because of the high savings rate I maintain. It shows how a relatively large sum of money can be built through the power of time, patience and perseverance.

It’s important to keep in mind that while updating the overall value of my portfolio is important for historical reference and for purposes of keeping track of total return, my main focus is on the rising dividend income stream the Fund provides.

My Freedom Fund had a very productive September, reaching record heights in value, invested positions and dividend income (which I’ll discuss in a later post). The market continues to break records, yet I still continue to do my best to add high quality investments to the portfolio when valuations make sense and fundamental quantitative analysis and qualitative reasoning beget fresh funds.

It was another busy month for the portfolio. In all actuality, I had planned on being relatively inactive as I felt the values in the market were relatively few and far between. I started off September by adding to my burgeoning position in Realty Income Corp. (O) and then stayed on the sidelines for most of the remainder of the month. In a last minute burst of activity, I decided to sell off most of my position in Intel Corporation (INTC) after a sixth consecutive unchanged dividend announcement and deteriorating business fundamentals. I used the proceeds from that sale to initiate a position in BP plc (BP), a company that has been on my radar for quite some time. Finally, I capped the month off by investing in Baxter International Inc. (BAX) after a significant pullback in shares.

The current market value of the Freedom Fund stands at $131,084.63. This is an increase of 5.5% over last month’s published value of $124,203.41. A fantastic increase, and due not only to the addition of fresh capital to the portfolio via the purchases listed above but also due to a particularly strong market performance throughout September. I’d be much happier with a weak broader market and more compelling individual opportunities, but I continue to invest monthly into the most attractively valued equities I can find while also being mindful of the overall construction of my portfolio.

I’m currently invested in 41 companies. This is an increase since last month, due to the opening of new positions in BP plc (BP) and Baxter International Inc. (BAX).

These updates are mainly designed to show the increase in the value of the underlying equities I’m invested in, but the main purpose of investing in dividend growth stocks is for the rising stream of dividends over time. So with that said I don’t put too much emphasis on these monthly updates on the value of my portfolio. I think it is a good idea, however, to keep track of the rising (or falling) value of one’s securities and be aware of where they are in terms of the marketplace and whether or not certain stocks are attractively priced. It proves to be a useful exercise, for me at least, to update the values monthly. It gives me fresh perspective on which equities are performing well and which aren’t, and from there I can make educated decisions (based on further due diligence) on which stocks I’d like to add fresh capital to (while considering portfolio weight as well).

Full Disclosure: Long O, INTC, BP, BAX

How are your portfolios doing? Did you have a productive September?

Thanks for reading.

Photo Credit: Vichaya Kiatying-Angsulee/FreeDigitalPhotos.net  

Comments

  1. That’s some great progress you’re making. I think you will hit the second century mark before you know it. I can share the gratifying feeling that you are having of managing to find good buys in a challening market. I’ve been buying “O” and I managed to do so below $40 twice. I think I will consider BP next.

    Keep on trucking!

  3. I like the trade out of Intel and into BP. I acknowledge BP has to work through their legal issues, but that isn’t going to bring down the company in my opinion. If they work the legal system correctly, it will be years before full liability gets settled and awarded, as happened with Exxon. The company is a compelling value play on a number of fronts in my view.
    Intel should have made better progress with mobile chipset development then they have. It’s very hard to surmount the significant lead that Qualcomm and others have on them. It’s a company that I’m comfortable avoiding at present. There are better DG prospects out there.

  4. Spoonman,

    Thanks for the continued support!

    You’re right: it is gratifying finding deals in an overheated market. We can only do our best, but I think I’ve navigated the portfolio fairly well thus far. I’ve made mistakes along the way, but the great thing about dividend growth investing is that it’s fairly forgiving because, for the most part, we’re dealing with very high quality companies. Time heals all wounds. 🙂

    You keep on trucking as well! You’re doing great.

    Best wishes.

  6. Integrator,

    Thanks! I’m quite pleased with the move away from INTC and into BP. I’m quite confident that BP will resolve the issues and they’ll continue profitable operations for many years to come. The Russian assets are just icing on the cake.

    I agree with you on INTC. It’s a shame they haven’t done more with the incredible clout and R&D they have. If Bay Trail doesn’t catch on and management is left to sing the same tune about “the next chipset” I’ll likely be selling what little I have left in the company.

    Cheers!

  8. I think I’m still too risk averse to put everything into a taxable brokerage account. My company match is miniscule so I could definitely do with a lower Roth 401k contribution. I’m scared, keep up the inspiration and I’ll join you eventually. -wallet engineer #1

  9. I love your blog, and I am currently in the process of reading though all your older posts. Thanks for the great info you make available. I was wondering if you had ever looked at Diebold (DBD?) They have been raising dividends for an amazing 59 years, and currently pay a nice yield of 3.9%. They make products for the banking industry including ATM machines, vaults and safes, etc.

  12. Investing Pursuits,

    Thanks! Although I don’t place a huge priority on account values, I’m really excited to see numbers like that one day. I hit $100k just a few months ago and that gave me a real feeling of elation.

    Hopefully your pursuits are going just as well as mine.

    Take care.

  13. Wallet Engineers,

    What I’m doing certainly is not for everyone. We all have different risk tolerances and goals. With that in mind, my strategy aligns very well with what I’m aiming to achiever. However, for many it makes sense to be a bit more conservative, and there’s nothing wrong with that.

    Remain in your comfort zone and you’ll sleep much better at night.

    Cheers!

  14. Shop Teacher,

    Thanks for following along. I appreciate the support and readership. This blog wouldn’t exist without readers like you.

    Per your question, no. It’s precisely because I already have a very solid foundation with stocks like JNJ, PM, PG, KO, CVX and the like that I feel comfortable putting 2% or so of my capital into BP. This reduces the risk even further on what I feel is a mildly risky investment. I think the risk with BP is perceived to be much higher than it really is, however that’s not to say it’s as safe as some of the companies you or I have mentioned here.

    I hope that helps.

    Best wishes!

  15. Brandon,

    Thanks so much! Glad you’ve enjoyed what you’ve been reading thus far. 🙂

    I’m not a fan of DBD. A great streak of dividend growth, but much of that growth for the last 5+ years has been very minimal. There is little growth with this company. The EPS has been very erratic over the last 10 years and has experienced contraction. I’m not a fan of the products or the company. I’d prefer to own shares in a high quality bank directly rather than the company who makes ATM machines. A machine is a machine is a machine, but it’s hard to switch banks.

    Best regards.

  16. Your blog is very inspiring! It’s been great following your journey and look forward to many more entries. What are your thoughts on BAX and the steep drop we have seen over the past few days? Might this be a good time to purchase?

  17. Pretired Nick,

    I’m trying my best, that’s for sure! I hope to keep this up for as long as possible. It’s really tough juggling the 50+ hour job, the blog, fitness, managing a large portfolio and life in general. But I’ve been doing okay so far. 🙂

    I don’t believe in rebalancing per se. I’m naturally rebalancing every time I purchase a new equity and the weightings of the other positions change. I would only rebalance via selling if I thought an equity deserved to be sold (like INTC lately). I don’t believe in rebalancing just for the sake of it, as transaction fees and taxes are something I try to avoid.

    Keep in touch!

    Take care.

  18. Anonymous,

    I love those monthly “rent” checks! It makes me feel like a landlord lucky enough to never hear from a tenant – which is pretty much what it is. 🙂

    Best wishes.

  19. Anonymous,

    Thanks so much! I’m always glad to hear from someone who finds what I’m doing inspiring. That’s exactly why I write – to inspire.

    I noticed the drop in BAX shares. I might be a little light on capital for October because my income was a little less than expected, but I’d love to buy more BAX if the capital allows. I love averaging down on my purchases when given the opportunity and the weightings make sense.

    Cheers!

  20. Congrats on a great month Jason!! I have followed your blog for about a couple years now and I want to say again that I appreciate your perspective, efforts and transparency.

    Like you I am excited about several opportunities right now as I am about to purchase one of the following: CVX, BP, XOM, GIS or JNJ for various reasons. If these companies were not already in your portfolio would you still be going for BP for potential upside value?

  21. I think I have become my dad He never did retire he worked until he died.I know he could have retired because I have seen the old records he was pulling down 3 penions and dividends and bond intrest ect.I could retire because my dividends ect are almost as much as my salary.Im 60 years old and got my first job when I was 12 years old. I think I spent so much time investing for future wealth I never stop to enjoy the trip So my advise is to get hobbies now I like my job and it is good to know I don’t have to be there I wont bother again for awhile

  22. Anonymous,

    Sorry to hear about your father, unless that’s the way he wanted it. It sure sounds like he just enjoyed working, in which case it all worked out for him.

    I plan the complete opposite. As soon as I know I can cover expenses I’m done. That’s just me. And that’s not just for lack of enjoyment in my career, but simply because I have too many interests in life.

    I hope you get to enjoy some of your time! 🙂

    Take care.

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